As the race heats up between Republican Governor Rick Snyder and his Democratic challenger, Mark Schauer, it’s worthwhile to ask how much difference the election will make to the Michigan economy. The answer is that, while it will probably make some difference, no governor in any state can bring about sudden and dramatic improvements to the economy. Like it or not, the Michigan economy is greatly affected by events beyond our borders, over which we have little or no control.
It’s useful to review some history. John Engler became governor of Michigan in 1991. The economy was flat in his first year in office, but it gradually picked up speed. Engler’s policies may well have helped, but it also helped that the price of oil was very low in the 1990s. This helped fuel a nationwide manufacturing boom. The boom was great news for the Michigan economy, but it was not due primarily to policies enacted in Michigan.
Engler’s policies did not suddenly change direction in 2000, but the Michigan economy did change direction. The price of oil went up, the stock-market bubble burst, and the national economy slipped into recession. In the last 32 months of Engler’s administration, Michigan lost nearly a quarter of a million jobs. Just as the boom of the 1990s was shaped primarily by events outside Michigan, so was the downturn of the last few years of Engler’s term.
It doesn’t make sense to say that John Engler was a good governor until 2000, and then suddenly became a bad one. Rather, the ebb and flow of the macro-economy is largely due to things over which Engler, like any governor, has little control.
National trends rule
Jennifer Granholm was governor during an extraordinarily difficult time for Michigan’s economy. Michigan manufacturing was flat during the first five years of her administration, and then it collapsed in the Great Recession of 2008-09. But the Great Recession wasn’t caused by policies enacted in Michigan. It was made on Wall Street and in Washington, not in Lansing.
Michigan’s economy finally started growing again in 2010, the last year of the Granholm administration. Granholm’s policies did not suddenly change direction in 2010, but the Michigan economy did.
The rescue of General Motors and Chrysler was especially important to the recovery. If these companies had been allowed to crash and burn, there is a very real possibility that the entire automotive supply chain would have imploded, causing hundreds of thousands of additional job losses in Michigan. Granholm and the Michigan congressional delegation deserve credit for pushing hard for the rescue, but they needed the support of the Obama administration, and they needed to get enough non-Michigan votes to pass both houses of Congress.
This is not to say that Engler and Granholm made no difference. Both did things that helped Michigan’s economy. Proposal A, passed in 1994, dramatically increased funding for public schools in the poorest districts in Michigan. Granholm signed Michigan’s first Earned Income Tax Credit, which has helped huge numbers of Michigan’s neediest families. These are real achievements. As we have seen, however, there are limits to what any governor can do.
The state’s job recovery, led by professional and business services and manufacturing, was well underway when Rick Snyder took office in 2011, and it has continued on his watch. Some of the economic growth may well be due to Snyder’s policies. In my judgment, however, most of it would have happened anyway, because of the strong growth in the national economy and the rebound of the auto sector.
Elimination of the Michigan Business Tax was a centerpiece of Rick Snyder’s campaign for governor. The MBT had some very bad features, and I had advocated getting rid of it years earlier (although I also wanted the lost revenues to be replaced fully, which did not happen). But I never thought that removing the MBT would have a huge effect on overall economic growth. I think there is a good chance that the tax shift has contributed to the economic growth of the last two years, but the effect is probably small.
In addition to the fact that Michigan is dependent on the national economy, it’s also true that policies take time to have an effect. One of my favorites among Snyder’s policies is the expansion of access to early-childhood education. I believe this will make a big difference in the long run, but it won’t bear much fruit for more than a decade.
Mark Schauer and Rick Snyder are similar in some ways—I like both men, I admire them both, and I know that whoever wins will work extremely hard. But I am not saying that it makes no difference whom we elect. There are real policy differences between them, and the people of Michigan need to pay close attention to the differences. But whoever is elected will be governor of a state that is greatly affected by outside events. I hope the national economy doesn’t slip into another recession. But if it does, neither Snyder nor Schauer will be able to keep Michigan from feeling the pain. Moreover, regardless of whether Snyder or Schauer is elected, the winner must deal with a dysfunctional legislature.
I am not saying that governors are irrelevant. But no governor is a magician.